Who bears the high cost of good intentions?

Since the 2009 Oregon Legislature convened, one of its most troubling issues has been the proposal to extend health insurance to 80,000 more children and 70,000 more adults. The goal is worthy, but the problem, not surprisingly, is how to pay for it.

At a time when the state's collapsing revenues are forcing cuts to programs for low-income seniors and the disabled, one might question starting an expensive new program to insure healthy kids whose parents make two or three times the poverty level. But after voters rejected a tax increase to fund this program two years ago, proponents decided that the health care system itself should be able to make up the difference.

The proposal is simple: a 4 percent tax on hospital revenues and a 1.5 percent tax on the sale of health insurance to raise the matching funds necessary to get $1 billion from the federal government to provide health insurance for children.

Supporters claim that the tax on hospitals and health insurance will pay for itself because the money raised, plus the money it brings from the federal government, will reduce the amount of uncompensated care currently provided for the uninsured. Unfortunately, the myth that increased health insurance coverage pays for itself by reducing uncompensated care and unnecessary emergency room visits is exactly that -- a myth.

The Institute of Medicine exposed this fallacy in a six-volume series it published a few years ago exploring the cost of underinsuring Americans. While strongly advocating expanded health insurance coverage, the institute made it clear it cannot be achieved without additional spending. The Oregon Health Plan has confirmed this conclusion.

Furthermore, not all of the additional health care spending generated under this plan will flow back to the people who pay the tax. While there are good reasons to make health care for children a top priority, they are not the major driver of uncompensated health care costs -- and particularly not for hospitals. One of the great benefits of a successful children's health insurance program is getting kids in for timely visits to pediatricians and family doctors. Over time, this should reduce future hospital usage, but the tax is paid by the hospitals now while the new funds go to the doctors.

In today's economy, many hospitals are already struggling. I serve as an unpaid volunteer member on the board of a nonprofit hospital. It has worked out the numbers and determined that it will fall $16.5 million short of recovering the additional taxes it would be paying under this plan. Thanks to the current state of the economy, it has been forced to lay off staff, cut salaries and raise fees. This plan will make its problems worse, not better.

There is an alternative proposal that most hospitals can support. It is a 1 percent surcharge on all medical claims paid. Although it would raise less money than the governor's proposal, it would also share the costs more widely. Unfortunately, it is a hard sell politically because it requires large self-insured corporations and labor unions to participate. While these plans stand to benefit as much as hospitals and commercial insurers, they understandably want to avoid additional costs and probably have the political clout to do so.

When most programs are being cut or eliminated, legislators understandably would love to go home and take credit for something new, so the original proposal continues to have traction. But a year from now, running for re-election at a time when health care costs and the number of uninsured families have increased rather than declined, these legislators are likely to be asked, "What were you thinking?"

Jack Roberts was Oregon labor commissioner from 1995 to 2002 and now heads the Lane Metro Partnership.